5) Using the supply and demand framework for bonds, illustrate what happens to corporate and Treasury bond yields in response to the following developments in a world where there is only one corporation (BigCon) that has and can issue bonds. Be sure to illustrate the corporate and Treasury markets side by side, N clearly labeling any initial and final yield differences, along with the initial and final levels of corporate and Treasury yields. Assume that there is no prepayment risk on any of the bonds and that there are no differences in liquidity, maturity, or tax treatment between these 2 types of bonds. Finally assume that BigCon can only incur debt by issuing bonds. (10 points) a) Suppose that the ratings companies (e.g., Moodys and Standard & Poors) and investors see the BigCon corporation as posing a medium initial level of default risk. Now suppose that BigCon just made a surprise announcement that its financial condition and outlook have worsened but that it will not change any plans to expand its operations with external financing. Does anything likely change? If so, illustrate what happens in each market and what happens to relative interest rates. b) Now in addition to the effect on bond demand in (a) suppose instead that BigCon does adjust its plans to expand its facilities using debt financing in light of its new outlook. In a separate chart, plot both the demand shifts from (a) with the additional supply shift in (b). Does anything likely differ from case a? If so, illustrate what happens in each market and what happens to relative interest rates